When it comes to price per square foot, suburbs are movin’ on up 

With home appreciation slowing, a longtime trend has switched course: Homes in the suburbs have become more expensive, on a price-per-square-foot basis, than those in the city. 

A recent report from Redfin indicates the price per square foot for a home in the suburbs was $206 in September, slightly higher than the $205 per square foot in urban areas.That's the first time it's happened since Redfin started tracking the data in 2018. In rural areas, the average price per square foot was $180.

An earlier Zillow report tracked prices as far back as 1998, which is when urban properties first started to trend higher. Previously, urban and suburban properties had similar values when looking at price per square foot. While it's not the only metric to consider when assessing the relative value of homes, price per square foot allows for an apples-to-apples comparison.

The trend switch is likely tied to price growth, which is slowing faster in urban areas than the suburbs. The per-square-foot value in city neighborhoods rose just 3.5% year-over-year, compared to 9.5% in suburban neighborhoods and 8.5% in rural areas.

"Urban home prices soared in 2021 as homebuyers gravitated back to city centers as the pandemic waned and affluent Americans – motivated by record-low rates – decided they wanted the best of both worlds: Homes with plenty of space for working from home, but located in walkable areas near shops and restaurants," said Redfin Senior Economist Sheharyar Bokhari in a news release accompanying the report. "Today's buyers can't afford everything on their wish list, so many are prioritizing space over walkability."

In response to buyer preferences, some suburban areas are improving walkability with redeveloped town centers, Realtor.com Senior Economist George Ratiu said in an email. Combining office, residential, retail and green spaces with transit lines has greatly changed the face of suburbs.

Ratiu also agreed that space, which is easier to come by in the suburbs, continues to be a priority, even as pandemic concerns have lessened. 

Bokhari expects the price-per-square-foot to continue falling fastest in urban neighborhoods, possibly providing a new opportunity for homebuyers in cities who "may find lower prices to help counteract the costliness of today's mortgage rates."

A handful of urban areas have already seen a year-over-year decline in the average price per square foot. The San Francisco Bay Area topped the list of biggest decliners, with a 6.2% drop — but homes in the metro still cost $976 per square foot, the highest rate in the U.S.

New Orleans (down 6% to $187), Philadelphia (down 3.2% to $187) and New York (down 2.7% to $557) also posted year-over-year declines.

Even with the devastation caused by Hurricane Ian, six Florida cities had the biggest year-over-year increases for price per square foot in September. Cape Coral topped the list with a 31.4% increase to $278, followed by North Port (up 27.9% to $444) and Lakeland (up 25.1% to $201). According to the report, these areas remain very popular with remote workers, retirees and second-home buyers despite the rise of climate-related disasters like hurricanes.